List obscure concepts/ formulas that are good to know

CFA Level III
#1

Texas Hedge - opposite of a hedge, doubling risk exposure “long underlying + long call”

footnote 34 currency reading

#2

Never noticed that before.

Don’t think I want to either.

#3

Calmar and Sterling ratios

#4

Texas Wedge - putter in golf

#5

something random would be applying Banyes Formula… I could see a really dumb 3 point AM question on it

#6

Probably the two estate tax formulas. Estate tax taxable and capital gains.

#7

These two are not obscure at all… you better know them in 11 days!

#8

I think :

  • Taxes (also RV of gifts)

  • Equivalen tax rate ( I mean when you aggregate Income, Capital & Wealth taxes)

  • Tax source residence methods (credit, exemption, deduction methods)

  • All of the CME formulas ( fed/ yardeni / CAPE )

  • Equity Market Valuation ( Cobb Douglas)

  • Grindol formula for return

  • Singer formula ( market integration / segmentation)

  • Formulas to calculate # titles of futures for equity / bonds ( yield beta , conversion factor ) / swaps ( the notional of the swap)

  • Effective Interest Rate when using options

  • Return of a leveraged portfolio

  • Duration of a leveraged portfolio

  • Payoffs of strategies with derviatives ( so you can calculate all the questions of maximum profit etc)

  • Return of investing in commodities futures ( so you understand roll / underlying and collateral return)

  • Utility funcion ( return - risk aversion parameter *.005* standard deviation)

  • All RAPM ( sortino ratio, treynor , jensen alpha, M2) etc

  • Taylor rule (always remember that you use target & trend - forecast ( for each, inflation and GDP), dont get a mistake by getting confused in what is negative and which is the positive, remember to add the neutral rate.

  • The 3 micro performance attribution formulas ( selection, allocation & interaction)

  • Macro performance attribution formula ( you know risk free rate + net contributions +…)

  • VWAP & Implementation shortfall formulas ( hhfggg)

  • Effective spread formula ( this is silly but remember to multiply by 2)

  • Not a formula but the concept regarding the CPPI, constant mix & buy and hold strategies in rebalancing.

I will update this if i remember some more.

I think formulas-questions have to be a “no brainer” for us. Its just memorizing, I know is difficult but c’mon in one full day we all can make it!! I mean, imagine you studied 5 - 6 months and you get a question wrong just because you didnt give you the time to memorize an stupid formula!! In 15 days we must make a compromise to memorize all of the f** formulas!!

Jorge

#9

^those are basically the core curriculum lol

#10

[Factor one * (Beta(a)(b)] + [Factor two * (Beta©(d)] + [Covariance Factor, (Beta(a)(d) + Beta(b)©]

cov(i,j) = sum[b(i,m)\*b(j,n)\*cov(Fm, Fn)]

Just bumped into this on Capital Market Expectations - OReilly

#11

Shrinkage estimator: A weighted average of correlation (or covariance) matrices created from at least two different correlation (or covariance) matrices generated from different sources.

#12

yes, because maybe oscure formulas for me are easy for you and viceversa, i preferred to put all I remember.